Christopher J

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Christopher J Powered By Docstoc
					Christopher J. Hughey, American citizen individual not associated with any organization for
this purpose
Date of submission: 22 March 2004
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Replace all current federal taxes with the revenue streams listed below. Note these replace all
current taxes: for example, there would be no more separate SS, FICA or Medicare
payroll deductions for individuals or payroll taxes for businesses. The only revenue
streams not replaced here are routine service, permit, application charges, etc. already
in place for government services and which account for roughly 5% of government

The philosophy here is simple: our economy is driven by essentially three sources of income -
salaries, corporate and property/rental profits, and returns on investments - and our
government should be supported in the same proportion as these three sources support the
overall economy.

Are the percentages below accurate? I seriously doubt it. I have gotten as close as I can with
my limited skills, but it would take experts such as those at the CBO, OMB or GAO to get
more exact figures, but even they would never be able to get it completely right. Only
enactment and then tweaking in subsequent years would get the percentages right. But I am
certain of four things: 1) the thresholds; 2) the deductions; 3) the need for automatic CPI and
PPI adjustments; and 4) most important of all, the underlying philosophy of supporting the
government in the same proportions we support the economy. The only adjustment I have
made is to shoot for about $100B less in personal income tax revenue than would be
proportionate because I feel quite certain that most of the pollution rights costs would be
passed directly to consumers through higher utility and transportation costs and this must be
offset. So take the tax rates with a grain of salt and focus rather on the overall structure.
Revenue target: $2 trillion (2005 dollars).
1. A tax rate of 30% applicable only to all income over $35,000.00 (2005 dollars) per annum
per person. A rate of 15% would apply to all income over $17,500 and up to $35,000.00 per
annum and 7.5% for income at or below $17,500. These rates apply to wages, lottery and
other gambling winnings, and inheritances. In the case of inheritances, however, the first
$200,000.00 will be exempt. There will be NO deductions except for a) IRAs and other
approved savings plans; b) daycare costs and higher-education tuition up to $11,350.00 (2005
dollars) per student; c) a maximum of $10,000.00 in primary-residence mortgage interest; d)
$2500 per minor dependant; e) charitable donations; and f) up to $2000 in out-of-pocket
healthcare expenses per person per family. All thresholds will be adjusted automatically every
year by the 12-month trailing CPI, with the exception of the primary-residence mortgage
interest deduction, which will be adjusted by the yearly percentage change in the average
price for a new home, and the healthcare deduction, which must be adjusted by healthcare
inflation rates. Guardians must take either the standard per-minor deduction or the tuition
deduction, but not both. For married couples, the income thresholds will simply be doubled
for those filing jointly. In other words, a family with one bread-winner earning $70,000 per
year with the couple filing jointly would pay a lower rate than a single person earning that
same amount.

2. A national sales and consumption tax of 25% on selected items, including but not
necessarily limited to all tobacco and alcoholic products; homes selling for more than three
times the average price for their respective communities (only on the amount over that
threshold); private cars, trucks and RVs selling for more than $40,000.00 (2005 dollars and
applied only to the value above the threshold and applicable to the MSRP for the vehicle and
any added options or the actual price paid, whichever is higher, and exempting all vehicles
with an overall MPG-rating of 35 or higher); all jewelry; private boats; private airplanes; non-
commercial recreational vehicles such as snowmobiles, jet-skis, etc; non-essential personal
services (e.g. domestic help, elective cosmetic surgeries not covered by insurance, spa
services, etc); individual home furnishings priced above $2500.00 (2005 dollars and only on
the value above the threshold). Every year, all price thresholds will be revised automatically
by the trailing 12-month CPI. The object of this tax is not to discourage or encourage any type
of behavior. It is simply a means of collecting revenue from those most able to contribute.
Congress must occasionally review and adjust these levels as the price increases of many
luxury goods do not stay in line with the overall CPI.

3. Capital gains and dividend tax: flat 21% on the net gain for everyone, with no exemptions
except charitable donations.

4. Corporations and those receiving rental income or other proprietors' income such as farm
income will pay a rate of 21% on profits, applied to all profits, foreign and domestic, of
companies incorporated in the US and on US profits of foreign corporations. Corporate
income is defined as all profit minus inventory valuation plus capital consumption adjustment.
No deductions of any kind except for charity and dividend payouts. Also, no amount over one
million 2005 dollars for any individual employee's compensation may be considered as a
business expense when calculating profit. Personal income tax rates will apply in cases of
frivolous incorporation. Clear guidelines will be established to help the IRS in determining
justifiable incorporation. In the case of individuals with no employees, for example, the
corporation must provide more than 75% of that individual's income. Finally, to help small
the dwindling number of small-scale farmers, the first $30,000.00 (2005 dollars) in privately-
held farm profit will be tax-exempt, except in those cases in which the filing entity is owned
by a larger corporate entity whose taxable income exceeds 100,000 (2005 dollars).
5. The second source of corporate taxation revenue will be a yearly sale of greenhouse-gas
and CO pollution rights. The price will be set by auction, but with a reserve price of $25
(2005 dollars) per metric ton of each of the seven main pollutants (CO, CO2, HFCs, PFCs,
SF6, Nitrous Oxide and Methane) up to the amount equal to the estimated total produced in
the US in 2004. Any company or farm needing to purchase rights after this limit is reached
must buy such rights on the open market from other polluters. The price will be automatically
adjusted each year by the trailing 12-month PPI, but the amounts allowed at auction will not
change. That said, if pollution rises despite these measures, Congress might deem it necessary
to raise the price per metric ton of pollution by more than the PPI, though this should be offset
by a reduction in the corporate tax to make it revenue-neutral. If the prices of polluting cause
industry to turn to methods that produce as much pollution but with different contaminants,
Congress should add these new contaminants to the auction list at the appropriate price and
amounts allowed. Congress may also deem it necessary to raise the reserve price of some
pollutants more than others.

Emissions rights must be purchased for all commercial and industrial emitters. In the case of
transportation, all car-, truck- and other vehicle-makers and airlines will be sold their rights at
a fixed price of $25 per ton to cover transportation pollution. The amount of pollution rights
they must purchase will be calculated by simply dividing the prior year’s total transportation
pollution by each company’s prior year new-car fleet estimated emissions (based on vehicles
sold and their MPG). Likewise, the airlines will divide up their allotment based not only on
miles logged the prior year but also the estimated per-mile emissions from their particular
respective fleets, thereby encouraging them to use less-polluting, well-maintained fleets of
aircraft. Airlines may trade for pollution rights on the open market if they need more or fewer
based on changes in fuel efficiency, miles flown, etc.

All existing pollution restrictions for the seven main pollutants will be lifted for industry: they
may pollute as much as they can afford. Likewise, there will be no more CAFE standards for
carmakers: if they choose, they may produce nothing but SUVs, but the costs would soon
become atmospheric. A company that produces zero-emissions vehicles would obviously face
far lower costs.

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